By Merit Ibe
The Manufacturers Association of Nigeria (MAN) has remarked that the huge fiscal deficit of N6.26 trillion in the proposed budget 2022, translates to further increase in debt servicing responsibility, upscale in drive for internally generated revenue, with moderate support for economic and productive activities, including manufacturing.
Commending the Federal Government on the proposed increase in allocation to defence, infrastructure, health and education among others, the association noted that the increase is an indication that government intends to maintain its quest to further narrow the infrastructure gap, secure the health of the populace, improve human capacity development and protect lives and property.
The Director General of the association, Segun Ajayi-Kadir, stated that it was imperative for government to exercise caution in borrowing and work diligently to lower recurrent expenditure.
This he said will positively impact the planned budget deficit and the efficacy of the budget as a whole.
Ajayi-Kadir emphasised the need to support the implementation of the proposed budget with a more production centric monetary policy that will crash interest rate to guarantee positive results; the transmission mechanism of seamless access to long term funds at affordable rate will naturally guarantee expansion in manufacturing investment; ensure full utilisation of idle capacities, increase capacity utilisation, upscale manufacturing output and improve its contribution to the GDP.
He said the association, therefore, expects that government will give priority consideration to full and timeous implementation of the budget, when passed, to stimulate the much-needed growth; deliberately stimulate production through improved government patronage of made-in-Nigeria products, being the largest spender in the economy.
“Ensure synergy between monetary and fiscal policy to guarantee better economic performance and inclusive growth; Prioritise the allocation of foreign exchange to the manufacturing sector for the importation of vital raw materials, machine and spares that are not available locally.”
“Prioritise the utilisation of locally produced construction materials in the current/ongoing upgrade of infrastructure across the country; Complement the current trend and performance of vital macroeconomic indicators with deliberate effort at taming inflation to maintain price stability in order to meet the expectations of the proposed budget;
“Initiate additional tax reforms and tax administration measures that will widen the tax net to compel the non-tax-paying individuals/firms operating to pay tax and thereby increase tax revenue; Reduce government recurrent expenditures to cut fiscal deficit, borrowings and associated service charges; and Redouble efforts at addressing the insecurity situation in the country to improve food production and supply and ensure unfettered business activities.
This will facilitate the attainment of the envisaged economic growth.”
He noted that the above rest principally on “our firm believe that the intentions and provisions of the proposed budget alone cannot guarantee success. In order to make sufficient and significant impact on the economy, they must be matched by supporting and complimentary policies, effective and timeous implementation, and regular monitoring and performance evaluation.”
Going forward, Ajayi-Kadir, said the top three amongst the low points of the proposed 2022 budget is the proposed excise duty on carbonated drinks which means further strangulation of the manufacturing sector that is already burdened with multiplicity of taxes/levies and fees.
He said the industries operating in this segment were already operating with extremely low margins, so the planned excise will push most of them over the edge, adding that the association risks an unprecedented build up of unplanned inventory, downsizing of labour force and factory closures.
“All these would vitiate the revenue expectations of governments and therefore counterproductive.
“Increased drive for collection of taxes and levies, bordering on multiplicity of taxes and untoward means of collection. The current unbridled avalanche of taxes, fees and levies from the three tiers of government and their overzealous regulatory agencies may be compounded. Most often this worrisome scenarios is contrasted with little attention to supporting infrastructure and facilitation of the productive sector.
“The highly ambitious assumption of 13% inflation rate, when the prevailing rate as at August 2021 stood at 17.01% and government is yet to address the incessant crises between the herdsmen & famers and other insecurity conditions that contributes significantly to food scarcity that evidently fuel inflation in the country.
“Preference for deficit financing to be funded by new borrowing, proceeds from privatisations and drawdowns on loans secured for specific projects. Deliberate efforts should be made to facilitate reforms that will drastically reduce the high recurrent expenditures of government.”